Housing inventory is up, but can you afford it?

June 14, 2010|By Veronica Chufo, vchufo@dailypress.com | 757-247-4741

Marshá Smith thinks she can afford a home priced at up to $150,000.

"If I don't qualify for how much I want, I'll keep pursuing it, maybe getting rid of some debt that I have that will eliminate extra money that I'm spending out," the 36-year-old Hampton resident said.

"But I'm not going to let it defer me from my dream."

It'll take about nine months to sell all the homes currently listed for sale in Hampton Roads. About six months is considered a balanced market.

With inventory levels up, there are plenty of available homes to look for. But only about 18 percent of the homes for sale in Hampton Roads fall below $150,000.

In fact, nearly two-thirds of the homes currently listed for sale are priced at more than what the median household income in the region can comfortably afford.

To afford a home priced at $218,000, which was the median sales price in Hampton Roads in 2009, a buyer would have to make a salary of $60,600 — a little more than the $57,122 median household income in Hampton Roads in 2008, according to analysis by the nonprofit Housing Opportunities Made Equal of Virginia. The analysis assumes a 10 percent down payment on a 30-year loan with a 6 percent interest rate and a mortgage payment that equals 30 percent of a borrower's income.

Only about a third — about 37 percent — of the homes listed for sale are priced below $200,000, according to a Real Estate Information Network analysis.

James V. Koch, economist and president emeritus of Old Dominion University, said those income and home price numbers mean that it's a good time to think about buying.

The percentage of median household income used to pay for a median resale home has fallen every year since 2006, according to the Old Dominion University's Economic Forecasting Project. It's estimated to drop to 23.2 percent in 2010, from the recent high of 33 percent in 2006.

"The problem is people don't have jobs or they're scared," Koch said. "They're reluctant to buy a house, or banks are reluctant to lend."

Or they don't qualify for a loan.

"Underwriters and investors are looking harder at loans than ever in the past," said Robert Runnells, production manager of Old Point Mortgage. "They're more restrictive. They're just more guarded and, with all the foreclosures, rightly so. Consumers have to jump through more hoops than they used to."

Some first-time buyers don't meet requirements such as credit scores, debt load and savings for a down payment. For example, to qualify for an FHA loan, a borrower's monthly debt, including housing expenses and other debt, cannot exceed 43 percent of the borrower's income, Runnells said.

"We see a lot of people now with a higher debt load and less assets than we've ever seen," Runnells said.

Smith, the Hampton homebuyer, said ideally she'd own a home with a two-car garage and plenty of space to entertain guests inside and out. She loves big kitchens with islands, stainless steel appliances and lots of cabinet space.

Smith has always wanted a walk-in closet, and thinks it would be nice to have side-by-side Jacuzzi tub and shower.

Her first home probably won't have all that, but there's hope, she said.

She's just ready have a home to call her own.

"Paying rent each month is a waste," Smith said. "It's just throwing your money anyway and never really owning anything for yourself."

Can you afford to buy a home in Hampton Roads? What can you afford? Add your comments.

A family with the median household income of $57,122 in Hampton Roads in 2008 could afford to buy a home priced at about $207,500 assuming they had no debt. On an FHA loan, they must pay 3.5 percent as a down payment — that's about $7,000 for a $200,000 home. Monthly mortgage payments would be between $1,300 and $1,400, assuming a 5 percent interest rate on a 30-year loan, according to Robert Runnells, production manager of Old Point Mortgage. It includes city real estate taxes but not closing costs.